A slowdown in manufacturing activity, uncertainty over the Bihar election results and heightened chances of a US rate hike depressed Indian equity markets on Monday.
The 30-scrip sensitive index (Sensex) of the S&P Bombay Stock Exchange (BSE) closed the day's trade down 98 points or 0.37 percent.
Initially, both the bellwether indices of the Indian equity markets opened in negative territory in sync with their Asian peers, which had been battered by weak Chinese factory data.
In addition to the Chinese macro cues, the latest domestic data on the manufacturing activity too subdued sentiments.
The Nikkei India Manufacturing PMI (Purchasing Manufacturers Index) for the last month showed a contraction due to a slower increase in new orders. The PMI was at a 22-month low of 50.7 in October.
At one point during the intra-day trade, the Sensex fell by 279 points. However, late-hour value buying pared some of the initial losses at bellwether indices.
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The other bellwether index -- 50-scrip Nifty of the National Stock Exchange (NSE) -- also closed the day's trade in the red. It was lower by 15 points or 0.19 percent at 8,050.80 points.
The S&P BSE Sensex which opened at 26,641.69 points, closed at 26,559.15 points, down 97.68 points or 0.37 percent from the previous day's close at 26,656.83 points.
The Sensex touched a high of 26,824.30 points and a low of 26,378.26 points in the intra-day trade.
Market observers' cited that the bearish PMI, heightened chances of a US rate hike coupled with falling Asian markets dented investors' sentiments here.
"The uncertainty over the Bihar election results is flaring volatility. The elections has made investors cautious. The results will show the current levels of popularity of the incumbent central government," Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.
"The fall in India's PMI data for October and heightened chances of a US rate hike too eroded investors' confidence here," James added.
The US Fed in its' FOMC meet held on October 27-28 signalled a possible rate hike in December.
Higher interest rates in the US are expected to lead away FPIs (Foreign Portfolio Investors) from emerging markets such as India.
Vaibhav Agrawal, vice president, research, Angel Broking, told IANS: "Markets remained in the red after closing negative for five straight sessions last week."
"The weakness was led by negative Asian cues. Earnings growth outlook also continues to remain tepid," Agrawal said.
The Asian markets were subdued by the weak Chinese manufacturing data -- Japan's Nikkei index was down by 2.10 percent, Hong Kong's Hang Seng index dropped by 1.19 percent and Shanghai Composite Index slipped by 1.66 percent.
China's PMI came in at 49.8 in October, unchanged from September, signalling a stagnation in manufacturing.
Gaurav Jain, director with Hem Securities said: "Subdued October auto numbers and depreciating rupee weighed on the sentiments. However, a sharp recovery was witnessed on back of strong European indices."
In Europe, London's FTSE 100 was down by 0.26 percent. However, France's CAC 40 rose by 0.41 percent and Germany's DAX Index was up by 0.72 percent at the closing in the Indian markets.
The Indian rupee weakened in the day's trade. It ended lower by 32 paise at 65.59 to a US dollar from its previous close of 65.27 to a greenback.
The foreign institutional investors (FIIs) were net sellers in the day's trade, whereas the domestic institutional investors (DIIs) were net buyers.
According to data with stock exchanges, the FIIs sold stocks worth Rs.272.67 crore, while the DIIs picked up stocks worth Rs.145.38 crore.
Sector-wise, S&P BSE capital goods index plunged by 157.34 points, healthcare index receded by 130.52 points and metal index plummeted by 93.15 points.
On the other hand, the S&P BSE consumer goods index surged by 62.75 points, oil and gas index gained by 27.37 points and information technology (IT) index rose by 26.57 points.
Major Sensex gainers during Monday's trade were Mahindra and Mahindra (M&M), up 2.25 percent at Rs.1,209.15; Coal India, up 1.59 percent at Rs.325; Reliance Industries, up 1.19 percent at Rs.959.15; Maruti Suzuki, up 1.05 percent at Rs.4,495.35 and ICICI Bank, up 0.83 percent at Rs.279.30.
The major Sensex losers were Bajaj Auto, down 4.85 percent at Rs.2,426; Hindalco Industries, down 3.69 percent at Rs.80.95; Tata Steel, down 3.28 percent at Rs.238.65; Vedanta, down 3.10 percent at Rs.96.90 and HDFC, down 2.80 percent at Rs.1,221.95.